$2.5 Million in Punitive Damages Awarded Over Mortgage Credit Report

A federal jury has just awarded $2.5 million in punitive damages – on top of $6,100 in compensatory damages – to a man who sued Ocwen Loan Servicing and Equifax for allegedly willful violation of the Fair Credit and Reporting Act.

The original complaint was filed in 2014, after the firms reportedly failed to investigate an alleged error on plaintiff’s credit report – one that cost him a refinancing for which he was applying.

An element of the FCRA, codified in 15 U.S.C. 1681, requires that a company investigate all disputes. Plaintiff filed numerous disputes with the loan servicer after he got an Equifax credit report that indicated he was behind on his mortgage. Ocwen countered its investigation was sufficient, but even if it wasn’t, plaintiff hadn’t proven damages because he had other negative accounts that impacted his loan application standing.

A consumer defense lawyer for plaintiff argued that the servicer’s “investigation” of plaintiff’s dispute involved doing nothing more than verifying his Social Security number and the account numbers on his loan.

Plaintiff had an upcoming balloon note mortgage. This is when a person pays a set amount over the course of several years, but at the end of the term, the remaining balance is due. At that point, the person either needs to pay that entire amount – in this case, $80,000 – or else refinance. Plaintiff sought to refinance.

But when he went to apply, his credit report indicated he was five months behind on his mortgage payment. This was false. The report also indicated he was in foreclosure. This also was totally untrue. Even the servicer acknowledged the foreclosure element was false.

The refinance loan was denied.

Plaintiff sued both Equifax and the mortgage servicer. Equifax settled with plaintiff prior to trial. The case against Ocwen continued to court.

As plaintiff’s attorney pointed out, the requirements expected of the servicer in a situation like this are actually quite low. All it has to do is thoroughly investigate the dispute. There isn’t even a requirement that they reach the correct conclusion. But the investigation does need to be thorough, and in this case, the analysis wasn’t reasonable – in large part because it refused to even look at the evidence provided by plaintiff that proved he was not behind on his mortgage payment.

Our Miami consumer rights attorneys believe that was the reason for the hefty punitive damage award. The compensatory damages in this situation were modest, but the amount of the punitive damages – the whole purpose of which is to punish a defendant for an egregious wrong – stemmed from the fact that this wasn’t just an accident or a mistake. This was a willful refusal to investigate, especially when information was easily available and verifiable.

Unfortunately, errors in credit reports are extremely common. That’s a part of the reason why last year, the three big credit report bureaus – Experian, Equifax and TransUnion – announced last year they planned to overhaul their procedures for resolution of certain disputes of unpaid bills. For example, the firms promised to wait six months before listing medical expenses as “delinquent,” which would allow insurers more time to process such claims. Still, there are a number of systemic problems with these bureaus that remain.

These reports touch every element of our lives – from whether we can rent an apartment, land a mortgage, buy a car or get a job. Companies must be held accountable when they fail to adhere to the basic standards of the law.